Agata runs a florist shop, Nature Florist.

The following budget was drawn, as the planed for expansion into the west midlands in the following year.

Income= 175,000

Direct cost: 12,500

Shop rent: 25,000

Purchase of flowers: 6,250

Cost of the other flowers accessories: 6,250

Staff wages: 9,375

Operating cost: 10,000

TORAL DIRECT COST; 63,125

Indirect overhead costs: 33,375

Manager's pay: 10,875

Marketing expenses: 15,000

Cinsultancy: 6,750

TOTAL INDIRECT OVERHEADS: 66,000

TOTAL COSTS: 129,125

Anticipated profit: 45,875

A management accountant reviewed the budget against actual figures(variance analysis) with a view advise on expansion plans.

The final actual figures were as follow:

1. Income 190,000 . Sales were better than expected due to a new partnership with a local funeral director.

2. Purchase of flowers 20,250. A local increase of flowers meant Agata could pay a lower price to local wholesalers who required immediate cash payment.

3. Cost of the flowers accessories was 6,500 as Agata made changes to the original designs, rising expensive materials.

4. Rent was 12,500/

5. Staff wages 15,000. Agata recruited part time staff to help meet increased demand for flowers.

6. Operating costs 9,000.

10. Manager's pay 36,000. The manager had to leave mid-way through the year and Agata completed all management tasks , taking some payment for this.

11. Shop expenses 8,000. Cost savings were successfully implemented by Agata when she took over.

12. Marketing and distribution 20,000. An advertising campaign was run to try to increase sales.

13. Cinsultancy for expansion was 4,500.

REQUIRED:

A.

Prepare a variance analysis of the business, comparing the budget figures with the actual results. State the variance and indicate whether they are adverse or favourable.

Should be prepared in the table or excel.

b.

Reconcile the actual profit to the budgeted profit figure.

needs to be find as following:

PROFIT RECONCILIATION:

1. budget profit

2. add: Favourable variances

3. Less : adverse variances

4. Actual profit/loss

C.

Evacuate Agata's use of budget and control through variance analysis.

(disavd/adv).